A top economist warns the US dollar will 'no longer be the dominant world currency' as trade in Chinese yuan rises

• The allure of the US dollar is waning, warned S&P Global's top economist.
• "We've got other things happening outside of the dollar world," Paul Greunwald said, per Reuters.
• Countries are lining up backup reserve currencies for trade amid sanctions against Russia.

A top economist chimed in on the ongoing debate on de-dollarization, warning that the allure of the US dollar is waning.

The greenback "doesn't have quite the pull it used to," Paul Gruenwald, the global chief economist at ratings agency S&P Global, said at a conference in London on Tuesday, Reuters reported.

The US dollar "will continue to be a leading world currency," Greunwald said, per Reuters. However, "it will no longer be the dominant world currency," he added.

Gruenwald's assessment came as countries around the world are flocking to backup currencies for trade following sweeping sanctions against Russia that expelled the country from the US dollar-dominated global financial system.

The Western-led sanctions spooked other countries so much that they are now lining up backup currencies for trade and even repatriating gold reserves for safekeeping.

"We've got other things happening outside of the dollar world," said Greunwald, citing a growing volume of trade that's being done in the Chinese yuan as an example, per Reuters. 

But the greenback's hold on the world's financial system is so strong that it accounted for almost 90% of global foreign currency transactions, according to a 2022 survey by the Bank of International Settlements, an organization whose members are central banks. 

And Greunwald isn't the only leading economist who thinks the dollar's dominance will diminish.

Nobel laureate and economist Paul Krugman wrote in an op-ed for the New York Times on Friday that the greenback's dominance won't last forever — "because nothing does."

However, he caveated by saying that while its dominance might be fading, the US dollar is far from being replaced as the world's leading currency in the short term.

"The hype about de-dollarization is much ado about almost nothing. For now, the dollar dominates because there just aren't any good alternatives," Krugman said.